Yard-stored bales, waterlogged cotton concerns FSA official

TUCSON, Ariz. -- Waterlogged cotton bales discovered in warehouses in the north-central Cotton Belt are embarrassing for the cotton industry, and a situation that ginners and cotton producers must monitor closely, according to Teresa Lasseter, administrator of the Farm Service Agency.

Lasseter, a Georgia native, made her remarks at the National Cotton Council’s annual meeting. She was named to head the agency in October 2005. As FSA administrator, Lasseter oversees farm programs, farm loans, commodity operations, conservation programs, disaster assistance and field operations at FSA offices in all 50 states.

“We have started getting reports of widespread mold and mildew showing on a large quantity of bales in storage in a warehouse and merchant facility in the north-central region of the Cotton Belt states,” Lasseter said of the water-packed bales.

“The average moisture content at several gins in the region exceeded the 7.5 percent maximum allowed. The exterior of the bales fell within the standards, but the core of several bales measured greater than 16 percent moisture. Since then, we found several problems at another warehouse.”

FSA regulations state that for a cotton bale to be pledged as collateral, “it must be in good condition and not water-packed.” The situation has prompted FSA to clarify its position on what constitutes a bale in good condition, and could include making bales with excessive moisture ineligible for loan.

“It’s somewhere we really hesitate to go, because we really don’t know exactly what the definition should be. But the input of cotton producers is valuable for us as we work to establish the policy.

“Whether intentional or accidental, the incident has an adverse effect on this industry,” Lasseter said. “Customer confidence is shaken. I urge you to closely monitor your cotton ginning process, especially now.

“We all make mistakes, but it’s how we respond to those mistakes that signals our worthiness as trusted partners. There is nothing more important than safe, affordable, abundant food and fiber. We need to keep America’s cotton industry where it needs to be — on the top, expanding global markets, producing the highest quality product in the world and profitable.”

Another problem was created by U.S. cotton growers producing the largest crop in history in 2006. “Production outpaced U.S. storage capacity, particularly in the Southwest. In anticipation of the problem, new storage space was added to accommodate about 500,000 bales. Unfortunately, we needed enough space for 1.5 million bales.”

One solution was to allow temporary, outdoor storage, which FSA permitted in 2005. “But current Commodity Credit Corporation rules prohibit loans on cotton bales that are stored outside. USDA is considering temporary storage on open yards that meet specific requirements. Those yards are currently limited to Kansas, New Mexico, Oklahoma and Texas.

“All loan cotton must be inside an approved warehouse by April 1, 2006,” Lasseter told the attendees. “We are seeking input on longer-term solutions. We want to know if USDA’s storage requirements for loan cotton should be revised. A formal request for comment is forthcoming. We need to consider all sides of this issue before we make a decision.”

Lasseter noted that the United States will officially terminate Step 2 payments on Aug. 1, 2006, to meet WTO requirements. “That means the last time a cotton bale is eligible for Step 2 support will be July 31, a Monday. However, you will have another 60 days to file paperwork for these final transactions. Since the due date of Sept. 30 falls on a Saturday, the effective last day is Sept. 29, 2006.”

Lasseter also addressed FSA office structure under the president’s proposal to cut $3 billion from USDA’s budget, reducing it to $93 billion.

There is a possibility that FSA may have to consolidate offices. “Each FSA state director is being asked to form a review team and make a recommendation for FSA structure in their state. This review must formulate a plan to operate within budget.

“One solution offered in individual states might include some consolidation of county offices. This may create a short-term inconvenience, but a long-term viability for the state’s successful operation. If closure and consolidation are warranted in a state, I’m suggesting that each farmer in the affected county be given a choice of where they want to conduct their business.”

Lasseter noted that FSA will be able to use nearly $1 billion from USDA’s Section 32 program to help farmers adversely affected by last year’s hurricanes. “This is part of a $2.8 billion package in addition to the $250 million already available. If you are among those growers and ginners who suffered a significant loss, you should be confident that help is available.”

Cotton producers and ginners can now sign up for the 2004 Cottonseed Payment Program. The CPP provides up to $10 million in assistance to producers and first-handlers of the 2004 cottonseed crop.

Cotton producers and first-handlers must operate in counties receiving presidential disaster declarations due to 2004 hurricanes and tropical storms. Final program guidelines appear in the Federal Register. Authorization for CPP comes from the Military Construction Appropriations and Emergency Hurricane Supplemental Appropriations Act.

Applications, instructions and a complete list of eligible counties receiving Federal Emergency Management Agency designations for individual disaster assistance are available by request and online at http://www.fsa.usda.gov/dafp/psd/Cottonseed.htm.

USDA calculates the payment rate (dollars per ton) by dividing total program funds ($10 million) by the total eligible payment quantity (tons) of cottonseed. The total payment to an eligible applicant cannot exceed $114 per ton of cottonseed multiplied by the applicant’s total eligible payment quantity.

In 2005, FSA began a transition from paper applications for loan deficiency payments to electronic applications. Although most electronic applications still came through a local county FSA office, more were filed on computers from home. In 2004, less than 2 percent of LDPs were applied for electronically. In 2005, more than 90 percent were processed using computers and the Internet.

“In 2004, there were fewer than 16,000 electronically-filed LDPs,” Lasseter said. “In 2005, there were more than 936,000 e-LDPs. Growers got their money back from the process in less time and it meant that local FSA employees were able to devote more time to other projects.”